RBC Canadian Manufacturing PMI lowest in historyStaff writer ▼ | March 3, 2015
The RBC Canadian Manufacturing Purchasing Managers' Index (RBC PMI) indicated a modest reduction in production levels during February, which ended a 21-month period of sustained expansion.
February PMI in Canada Lowest level in almost four and a half years
A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.
Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI dropped from 51.0 in January to 48.7 in February, to signal a moderate deterioration in overall business conditions across the manufacturing sector.
The headline index was below the neutral 50.0 threshold for the first time in almost two years, with the latest reading also the lowest since the survey began in October 2010.
Manufacturing PMI was at lowest level in almost four and a half years. Output, new orders and employment all decreased in February. A weaker exchange rate led to robust and accelerated input cost inflation February data indicated a decline in manufacturing output levels for the first time since April 2013.
Anecdotal evidence suggested that weaker client spending patterns had contributed to lower production volumes during the latest survey period. A number of manufacturers, especially intermediate and investment goods producers, cited lower demand from clients in the oil and gas sector.
Volumes of new work received by manufacturers in Canada decreased at a moderate pace in February, thereby ending a 22-month period of continuous expansion. Moreover, the reduction in overall new order levels was the second-fastest since the survey began in October 2010.
New export sales also decreased in February, with the rate of decline the most marked for three years. Panel members noted that sharp falls in energy infrastructure spending had weighed on new business volumes from abroad. However, some manufacturers commented on the positive influence of exchange rate depreciation and stronger U.S. economic conditions.
Lower levels of new work and reduced production volumes contributed to a fall in manufacturing payroll numbers in February. Staffing levels have now declined for two months in a row, and the rate of job shedding accelerated to its fastest pace in almost four-and-a-half years of data collection.
That said, a number of firms noted that payroll numbers had been lowered through hiring freezes and the non-replacement of voluntary leavers.
Input buying also decreased at a survey-record pace during February, although the rate of contraction was only moderate. Nonetheless, supplier lead-times continued to lengthen, which some firms linked to disruptions at U.S. West Coast ports.
Average cost burdens rose at a sharp pace in February, with the rate of inflation accelerating to a five-month peak. Higher input prices were overwhelmingly linked to the impact of exchange rate depreciation against the U.S. dollar. Meanwhile, factory gate charges rose only moderately across the manufacturing sector, but the rate of inflation picked up from January's recent low. ■